Swedish Group Proceedings Act

The Swedish Group Proceedings Act (the “Act”) came into force 1 January 2003 after considerable debate both on the actual need for the new legislation, and the potential risk of “opening the floodgates” for litigation. There were also fears that the Act could be misused - leading to “legal blackmail”, with companies subject to group actions being compelled to reach quick settlements on unprofitable terms to avoid adverse publicity.

However, one of the main purposes of the Act was to improve access to justice and to ensure that people with low-value claims, which they might otherwise have struggled to bring, are given an opportunity to get financial compensation.

A group action, for the purposes of the Act, is an action that a claimant brings as representative of several persons. The action will bind the entire group, even though the group members are not necessarily parties to the action. The Act applies in cases where the same event has given rise to a number of identical or similar claims for a group of people. For example, when several people are injured by a dangerous product, creating a group of people with claims based on identical circumstances, against the same party. A further example is a group of consumers who have entered into the same unfair standard contract with a company.

A group action may be brought by a natural person, a legal entity, a non-profit organisation or by designated government authorities against physical or legal entities. Potentially interested parties will be notified of the proceedings and must send a written statement to the Court in order to be covered by the judgment.

A condition for the Act to apply is that the action can be brought against the defendant before a Swedish court. In accordance with the Brussels I Regulation, Swedish courts may be competent to process group actions against a company seated within the EU in a wide range of different situations. For example, the Swedish courts have jurisdiction over disputes:

related to contract if the place of the performance of the contractual obligation is Sweden (often the place of delivery);

involving claims for non-contractual damages where the harmful event has occurred in Sweden;

arising out of a branch, an agency or other establishment, if the establishment is situated in Sweden; and

involving customers when the consumer is domiciled in Sweden.

Similar jurisdictional rules apply as regards companies seated outside the EU. Since group action proceedings are intended to complement conventional legal proceedings, a group action may only be heard by the court if certain special preconditions are satisfied. For example, a group action must be more appropriate than separate actions by each of the members of the group. Furthermore, the person bringing the action on behalf of the group must be an appropriate representative and must have the financial resources to bring an action. These and other preconditions are intended to protect the Act.

The rules on litigation costs in group proceedings may also have the effect of restraining people from commencing unfounded group proceedings. The normal rules on litigation costs in Swedish civil cases are applicable; the unsuccessful party must pay the other party’s legal costs. This may amount to a considerable sum for the claimant. The members of the group are not parties to the proceedings and the principle position is that they will not be responsible for any costs although there are exceptions to this general rule. In accordance with the Act, the person representing the group may enter into a “risk agreement” with the lawyer, to the effect that the lawyer’s fee will depend on the outcome of the case.

According to information received from the Swedish Ministry of Justice (with some reservation made as regards the exact number), only eleven applications to initiate group proceedings have been filed since the entry into force of the Act in 2003. No case has yet resulted in a judgment on the merits. A commission has now been appointed by the Swedish government to evaluate whether the Act fulfills its purposes, namely whether it strengthens access to justice. The commission will, for example, consider whether the rules introduced to protect the interests of the defendant are appropriate - since they might deter people who would want to initiate group proceedings. The commission’s evaluation report is to be presented before 31 March 2008.

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